Prices as fuel costs soar

The Mozambican Federation of Road Transport Carriers Associations (Fematro) will propose to the government a hike in travel prices, aiming to ensure the sustainability of the activity, due to the cost of fuel, the president of the association told Lusa on Tuesday.“There is no other option: with more of these increases in fuel prices,” announced on Monday, “we will propose to the government the readjustment of travel prices,” said Castigo Nhamane. 

Nhamane considered the public transport activity in Mozambique “unsustainable”, as the prices currently in force do not cover the costs of the operation.“We are in this activity because of our commitment to public service and because we cannot unilaterally decree increases, but several operators have been parking their cars, worsening the transport crisis, because fewer vehicles are circulating,” Castigo Nhamane said. The president of Fematro noted that the sector’s business people are also confronted with the rise in costs of other essential components for the viability of the activity, mainly parts and accessories, as well as recent readjustments in fuel prices. “To avoid the increase in the cost of passage, we have been proposing other mitigation measures to the government, but there has been no response,” he stressed.

On Monday, Mozambique’s Energy Regulatory Authority (Arene) announced an increase in fuel prices, with an increase in all petroleum products starting today. Petrol rises from 77.39 meticals (€1.13) to 83.30 meticais (€1.22) per litre, diesel rises from 70.97 meticais (€1.00) to 78.48 meticais (€1.15) per litre and domestic gas also scheduled to rise, from 80.49 meticais (€1.18) to 85.53 (€1.25) per kilo, according to the new table presented at a press conference by Arene.Light oil also goes up from 50.16 meticais (€0.73) to 77.48 meticais (€1.13) per litre.

According to Arene’s president, Paulo António da Graça, the Mozambican government sought to avoid a readjustment that would put pressure on citizens, temporarily dropping the tax on fuel to avoid a drastic rise. “The application of these measures allowed a reduction of the real increases, aiming to minimise the impact on the final consumer. Looking, for example, at diesel, which is a primordial product for our economy, an effort was made so that the adjustments were not made based on real prices, where we would have an increase of around 13 meticais [€0.19],” Paulo António da Graça said.

 

Mozambican economy

The Mozambican economy is prone to risks and uncertainties caused by the terrorism that has been plaguing the northern province of Cabo Delgado, a possible increase in Covid-19 infections, natural disasters and the intensification of the Russian attack against Ukraine, leading to rising global food and fuel prices. The IMF resident representative in Mozambique, Alexis Cirkel, gave this overview on Thursday in Maputo, when he presented the IMF Regional Economic Outlook for Sub-Saharan Africa. At least one of Cirkel’s concerns seems misplaced: far from accelerating, the number of Covid-19 infections has sharply declined in recent weeks, and there is no likelihood that the government will decree any form of lockdown. The mass vaccination campaign against Covid-19 has reached over 92 per cent of all Mozambicans over the age of 18, so that, even if the country is hit by a fifth wave of the pandemic, few people are likely to be hospitalised, let alone die. Under the new programme recently negotiated between the Mozambican government and the IMF, Cirkel said, about 470 million will become available to provide financial assistance for reforms and policies implemented by the Mozambican government. He warned that “reforms” must remain a priority, especially the diversification of the economy and investment in human capital.

 “The IMF programme with the government of Mozambique aims to support some of the necessary reforms, such as strengthening sustainable macro-economic stability consistent with inclusive and sustainable growth leading to the reduction of poverty and inequality”, he stressed. Cirkel said that Mozambique will suffer indirectly from the Russian invasion of Ukraine, largely because the war will provoke increased fuel and grain prices. Both Russia and Ukraine are major wheat producers, but the Russian blockade of the Ukrainian Black Sea ports has dramatically cut Ukrainian grain exports. The price of the wheat imported by Mozambique has already risen this year, and Cirkel noted that in several provinces, bakers are increasing the price of wheat. But Cirkel believed the main risks to the Mozambican economy were the terrorist violence in Cabo Delgado, and natural disasters. “Terrorism increases fiscal pressures”, he said, “delays the natural gas projects, and increases poverty and inequality”. As for the IMF’s macro-economic forecasts, Cirkel said he expected the GDP to grow by 3.8 per cent this year, rising to five per cent in 2023 and 8.3 per cent in 2024. The IMF believes that Mozambican inflation will reach nine per cent this year, falling to seven per cent in 2023.

Rwanda-Mozambique business forum

 

Over 50 business operators from Rwanda’s different sectors arrived in the Mozambican capital Maputo on Monday for the Rwanda-Mozambique business forum. “We are looking for potential partnerships in different investment areas and our traders are ready to expand and explore more opportunities here,” said Robert Bafakulera the Chairman Private Sector Federation-Rwanda . Excitement as our members showcase #MadeInRwanda products in #Mozambique. They’re part of Rwanda-Mozambique business Forum that kicked off today. This is a great platform to expand their market base and get partnerships with their counterparts.

Last year, Gil Bires, Director General of Mozambique’s investment and export promotion agency APIEX invited Rwandan business operators to explore the vast investment opportunities in his country. “We are open. There is a window for opportunity that the Rwandan private sector can take advantage of. And they are most welcome. We have a very attractive regulation on investment which is friendly for foreign direct investments,” Gil Bires said. Mozambique has untapped opportunities in domains such as agriculture especially in production of cereals, fruits, flowers, and vegetables, for both the local and export markets.

Other lucrative investment areas include energy, infrastructure, manufacturing, mineral resources, and fisheries and aquaculture. According to Bires Mozambique has a lucrative oil and gas sector but agriculture, manufacturing, tourism, infrastructure and energy are, presently, Maputo’s priority investment sectors even if “we are open to other investments.”

Mozambican investment law grants certain tax and customs benefits depending on the amount, location and sector of investment activity. Mozambique has an area of 799, 390 square kilometres and a population of about 24 million people. In Mozambique, land belongs to the state which means that it is easy for those that want to invest in agriculture to have access to land. Rwanda and Mozambique diplomatic ties have for the past two years flourished and the leaders of these two countries have signed a list of treaties. I Maputo muri Mozambique hateraniye inama ihuje abashoramari 54 bo mu Rwanda na bagenzi babo bo muri icyo gihugu, aho barebera hamwe amahirwe y’ishoramari aboneka mu bihugu byombi. Last year, Rwanda airlifted a 1,000-person contingent of the Rwanda Defence Force (RDF) and the Rwanda National Police (RNP) to troubled Cabo Delgado Province. The Rwandan contingent was deployed to support efforts to restore Mozambican state authority by conducting combat and security operations, as well as stabilisation and security-sector reform (SSR). Rwanda’s contingent of 1,000 soldiers is the biggest foreign force in resource-rich Cabo Delgado, which is the site of a $20 billion (€17 billion) liquefied natural gas project operated by French energy giant Total. But the area has also seen numerous attacks carried out by Islamist jihadis. The violence has uprooted more than 800,000 people.

IHL

We are delighted to announce that Mozambique has taken an important step forwards in implementing and promoting international humanitarian law (IHL). The Mozambique government established the Interministerial Commission on Human Rights and International Humanitarian Law through a presidential decree on 28 April 2022. The commission is a government body dedicated to coordinating and monitoring the implementation of human rights and IHL in Mozambique through reports, statements and the drafting of recommendations. The new commission is the culmination of years of dialogue between the ICRC and the Mozambique government. The process began back in 2006 when Mozambique started taking part in the regional annual events for southern Africa on IHL implementation, and it was further consolidated in 2017 when the ICRC opened a mission in Maputo.

The new commission is presided over by Mozambique’s prime minister, with the minister of justice taking on the role of vice-president .  The commission is supported by a technical commission and secretariat.

The commission’s work includes analysing and identifying the main international treaties for signature, ratification and/or accession by the state, identifying opportunities for training and capacity-building, implementing activities that promote human rights and IHL with the authorities and the public, and monitoring the progress of action plans on human rights and IHL issues. We congratulate Mozambique for taking this important step in implementing IHL and meeting its obligations.

1,500 MW

The African Development Bank has signed an agreement with Gabinete de Implementação do Projecto Hidroeléctrico de Mphanda Nkuwa, an implementing entity, to provide advisory services for the development of the $4.5 billion 1,500 MW Mphanda Nkuwa Hydro Power Project in Mozambique. The agreement was signed Tuesday on the side-lines of the Bank’s Annual Meetings, which are taking place in Accra from 23-27 May. The agreement was signed by Mr Carlos Yum, Director of Gabinete de Implementação do Projecto Hidroeléctrico de Mphanda Nkuwa and Dr. Kevin Kariuki, African Development Bank Vice President for Power, Energy Climate and Green Growth.

President Filipe Nyusi of Mozambique and African Development Bank President Dr. Akinwumi Adesina witnessed the signing. Gabinete de Implementação do Projecto Hidroeléctrico de Mphanda Nkuwa is part of the Mozambique government’s Ministry of Natural Resources and Energy. The project entails development of a hydropower plant to be located on the Zambezi River in the Marara District of the country’s Tete Province. The plant will be 60 km downstream from Cahora Bassa dam and 70 km upstream from Tete city. A transmission system comprising 1,300 km of 550kV high voltage DC transmission line between Cataxia and Maputo will also be constructed. The Mphanda Nkuwa project is expected to reach financial close by end-2024; commissioning is anticipated in 2031.

 “The partnership with African Development Bank further strengthens the capacity of our implementing agency to develop the Mphanda Nkuwa project. The African Development Bank will ensure that world class environmental, social and governance and associated standards are adhered to during the development, and that the project is attractive to reputable developers, financiers and investors to ensure competitive and least-cost power for Mozambique and the region,” said Mr. Yum.

The agreement consolidates the Bank’s role as Africa’s premier development finance institution, and as a trusted partner and provider of advisory services and assistance in the development of transformative projects. Continued expansion of Mozambique’s generation capacity is required to meet growing domestic demand and drive economic and social development. In addition, the southern Africa region offers market opportunities that Mozambique is well placed to meet as a supplier of competitively produced energy. Mphanda Nkuwa is projected to have one of the lowest electricity production costs in the region.

“The project reinforces our efforts to combat climate change in a region that is desperately short of power but equally in need of transformation and a just energy transition. It is also a great privilege to lead the Bank’s team that will be executing this advisory mandate. We are honoured to be chosen by Mozambique to partner on this important project,” said Dr. Kariuki.

The project builds on earlier success in attracting private investment into the country, including several independent power producers (IPPs). These include the 175 MW Central Térmica de Ressano Garcia, the 120 MW Central Térmica de Gigawatt, the 40 MW Mocuba solar plant, the 40 MW Metoro solar plant and, most recently, the 450 MW Temane Power Project. Mphanda Nkuwa project is included in Mozambique’s National Energy Sector Master Plan 2018-2043 as a national priority, as well as a priority investment for the Southern Africa Power Pool Plan. 

The project enhances private sector competitiveness through infrastructure development and regional energy trading. It is also aligned with the Bank’s 10-Year Strategy, as well as the “Light Up and Power Africa High-5 strategic priority.

Amepetrol

 The Mozambican Association of Oil Companies (AMEPETROL) claims that the country has a sufficient amount of fuel to meet demand. The pronouncement follows some news items suggesting a possible fuel shortage in the country’s oil companies. Amepetrol secretary general Ricardo Cumbe explained to consumers that this is incorrect. “We don’t have any problems with stocks at the moment. There was a situation of misinformation on social networks, and the information being circulated did not correspond to the truth. Consumers should not panic. Continue to lead life in a normal way; do not become agitated,” he advised.

ALSO READ: Mozambique: Amepetrol calls for new fuel price hike – Watch

Cumbe clarified that the difficulties recently presented by the association referring to the mismatch between the price of imported fuel and that charged in the country were a matter of record, but that the issue was already the subject of contacts with the government. Prime Minister Agostinho Maleiane recently ruled out the possibility of state subsidies to some subsectors, including fuel, as a way of addressing the rise in prices caused by the war in Ukraine.

 

US$456 million

The IMF Board approved a SDR 340.8 million (about US$456 million) ECF arrangement for the Republic of Mozambique, with SDR 68.16 million (about US$91 million) available for immediate disbursement. The three-year arrangement will help support the economic recovery and policies to reduce public debt and financing vulnerabilities, creating space for priority investments in human capital, climate adaptation and infrastructure. The program supports the authorities’ ambitious reform agenda, with key policy actions focusing on establishing a sovereign wealth fund to transparently manage LNG wealth, mobilizing additional tax revenue, and strengthening public financial management and governance.

Washington, DC – On May 9, 2022, the Executive Board concluded the 2022 Article IV consultation [1] and approved a new three-year arrangement under the Extended Credit Facility for the Republic of Mozambique for SDR 340.8 million (about US$456 million), or 150 percent of the country’s quota. The Board’s approval allows for an immediate disbursement equivalent to US$91 million, or SDR 68.16 million.

A moderate recovery is taking hold. After a real GDP contraction of -1.2 percent in 2020—the first in 30 years—growth resumed in 2021 and is now becoming more broad-based. While COVID cases and deaths have been below regional averages, three large waves of infections in 2021 and 2022 moderated the strength of the recovery. After initial supply constraints, vaccine rollout intensified in late 2021, with 46 percent of the population having received at least one shot (42 percent fully vaccinated by end-March 2022). Poverty has increased from a poverty headcount ratio of 61.9 percent in 2019 to an estimated 63.3 percent in 2020 as a result of the crisis, albeit mitigated by welfare and social protection measures undertaken with international support. The war in Ukraine is pushing up fuel and food prices. Inflation rose to 6.7 percent year-on-year in March 2022 mainly due to rising global prices but also the impact of tropical storms on local food prices. In response, the Bank of Mozambique raised its policy rate 200 basis points in March 2022.

The authorities are implementing an extensive reform agenda, including strengthening the management of state-owned enterprises and their debts, improving fiscal risk management and debt transparency, and strengthening public financial management and the anti-corruption framework. The reform agenda supported by the program includes further governance reforms, buttressing the anti-money laundering framework, and creating a sovereign wealth fund. Medium-term prospects are positive; growth excluding extractive industries is expected to rise to about 4.0 percent per year, with higher overall growth rates related to large liquefied natural gas (LNG) projects that are set to begin production later in 2022. Following the Executive Board discussion, Mr. Bo Li, Deputy Managing Director and Acting Chair, made the following statement:

“Mozambique has managed the COVID pandemic relatively well, maintaining macroeconomic stability and reform momentum even as the country has weathered a series of shocks, culminating with the effects of the war in Ukraine. With policy space now limited, sustaining the economic recovery underway and tackling debt vulnerabilities are priorities. The new three-year ECF arrangement of 150 percent of quota (SDR 340.8 million or about US$ 456 million) aims to buttress the economic recovery and policies to reduce public debt and financing vulnerabilities, along with creating fiscal space for priority investments in human capital, climate adaptation and infrastructure. It is also expected to catalyse additional financing by development partners.

“Fiscal policies appropriately envisage a moderate pace of adjustment that balances sustaining economic activity with reducing debt and financing vulnerabilities. Maintaining space for social protection spending on the most vulnerable households is an important objective of the authorities’ program. The authorities’ commitment to establishing a sovereign wealth fund to transparently manage LNG wealth should be complemented with a framework to weather the impact of commodity price volatility on the budget. Continued progress on reforms supporting the efficient and transparent management of public resources is important.

“The prudent monetary policy stance is warranted given rising inflationary pressures. The Bank of Mozambique’s pursuit of adopting an inflation targeting regime is commendable. Continued efforts are needed to further strengthen financial sector supervision, promote financial inclusion, and address weaknesses in the AML/CFT framework. The program will support the authorities’ ambitious structural reform agenda. Further progress on governance and reforms reducing vulnerabilities to corruption are important to improve the business environment and foster a durable and inclusive reduction in imbalances. Given Mozambique’s high vulnerability to natural disasters focusing on building climate resilience will also be critical.”

 

 

Public debt interest increased in 2021

The Mozambican state spent more money on debt interest rates in 2021 than it did in the previous year. The 2021 report by the Ministry of Economy and Finance indicates that public debt grew last year. On a positive note, the debt to gross domestic product (GDP) rate fell. It is, in fact, further proof that the recent increases in interest rates have also affected the state, which also has debts with national banks. Mozambique spent more money on public debt interest last year than in the previous year, the 2021 Public Debt Report, produced and published by the Ministry of Economy and Finance, reveals.

From 2020 to 2021, the amount that the state spent on interest rates grew, because the weighted average increased from 4.7% to 5.6%. Note that this is a direct result of the worsening trend in the benchmark MIMO interest rate in Mozambique. Last year, the average rate of external debt was 2.2%, while that of internal debt was 15.6%. Naturally, in nominal terms, the value of the external debt turns out to be higher, because the stock is three times higher.

The growth in the cost of public debt takes place in a context in which Mozambique has postponed the payment of instalments equivalent to US$175.6 million on loans from some of the country’s largest creditors, such as China, Japan and Portugal, as well as from Belgium, France, South Korea South and Spain. This is in light of Mozambique’s accession to the Debt Service Suspension Initiative of the Paris Club and G20 countries.But there is also good news: the debt sustainability index has improved substantially. In 2020, Mozambique’s public debt represented 92.2% of all the country’s wealth, but in 2021, it represented only 78.6%.

The government’s target is 60% by 2025.However, the reduction in the weight of public debt in relation to GDP does not mean a drop in the stock of credits. In fact, what happened was that, in 2020, the first year of Covid-19, Mozambique had an economic decrease of 1.3 percent and, in 2021, our economy grew by 2.1%.

Mozambique’s public debt, in fact, went from US$12.9 billion in 2020 to US$13.9 billion in 2021. Of these US$13.9 billion, US$10.4 billion relates to external debt, and US$3.5 billion to what is owed domestically.